2021 – 2022 Senior Citizen State of Indiana and Federal Tax Deductions

For senior citizens, there are a variety of tax deductions that you may be able to claim on both your Indiana and Federal Tax Filings. For those who are filing their taxes, looking at the overall tax snapshot of your state and federal taxes is important for perspective. To ensure that you’re getting the most out of your money, begin by looking at your income taxes and state sales tax rate, then progressing to social security, retirement accounts, property, and additional exemptions, deductions, refunds, and credits that you may be eligible for to give you the biggest possible refund.

Indiana Tax Deductions for Seniors:

Indiana State Income Tax Rate 2022

The State of Indiana has a standard state income tax rate of 3.23%.

Indiana does not have a standard deduction for taxpayers that you can claim on your state income tax return. However, there are personal exemptions, like those below that you may be able to use to lower your tax liability

Source: Bankrate – Indiana State Taxes – 2020-2021 and Indiana Department of Revenue – Tax Rates Fees & Penalties

Indiana State and Local Sales Tax Rate 2022

There is only one statewide sales and use tax in Indiana at the rate of 7%, which is higher than the average state sales tax. However, Indiana does allow local municipalities to collect taxes. Therefore, the sales tax in the State of Indiana is relatively average at 7%. (Combined State and Average Local Sales Tax Rates as of December 2021 – High: Louisiana – 9.55%, Low: Alaska – 1.76% and Hawaii – 4.44%).

Source: Indiana: Sales Tax Handbook and Tax Foundation – State and Local Sales Tax Rates, Midyear 2021

Indiana Has Zero Social Security Tax

Indiana is one of the many states that does not impose a tax on social security benefits. Taxable Social Security and Railroad Retirement on your Federal tax return are exempt from Indiana Income Tax.

Source: Indiana Department of Revenue – Social Security and Railroad Retirement Benefits

Human Services Tax Deduction

Those who are eligible for this deduction received Medicaid payments, were not living at home and were receiving care in a hospital, skilled nursing facility, and intermediate care facility, licensed county home, licensed boarding or residential home, or an eligible and certified Christian Science facility (certified by the Accreditation of Christian Science Nursing Organization/Facilities, Inc.)

Source: Indiana Department of Revenue – Human Services Tax Deduction

Indiana Partnership Long Term Care Policy Premiums Deduction

Those who are eligible are paying premiums for Indiana partnership long term care insurance. The premiums that are paid for this policy are eligible for deduction. This policy qualifies under the Indiana Long Term Care Program for Medicaid asset protection. This policy may provide benefits in excess of the asset protection in the Indiana Long Term Care Program.

Source: Indiana Department of Revenue – Indiana Partnership Long Term Care Policy Premiums Deduction

Civil Service Annuity Deduction

If you received a civil service pension (nonmilitary) and are at least 62 years of age, then you may be eligible for up to a $16,000 deduction. A surviving spouse (no minimum age requirement) may be eligible to claim the deduction.

Source: Indiana Department of Revenue – Civil Service Annuity Deduction

Unified Tax Credit for the Elderly

If you and/or your spouse are 65 or older by the end of the tax year, you may be able to claim the unified tax credit for the elderly. The credit ranges from $40 – $140, depending on your age, marital status, and income. Taxpayers who are filing for this credit must meet all of the requirements, which include:

  • You and/or your spouse are age 65 or older by the end of the tax year
  • You must file a joint return if you were married and living together at any time during the year.
  • Your federal adjusted gross income must be less than $10,000
  • You must claim the credit by June 30 of the tax year
  • You must have been a resident of Indiana for six month or more during the tax year
  • You must have not been in prison for 180 days or more during the tax year.

Source: Indiana Department of Revenue – Unified Tax Credit for the Elderly

Indiana Property Tax Benefits, Deductions, and Exemptions for Seniors 65 and Older

Over 65 or Surviving Spouse Deduction

If you receive the over 65 or surviving spouse deduction, you will receive a reduction in your home’s assessed value of $12,480 or half the assessed value, whichever is less. The lower the assessed value of your home, the smaller your property tax bill. There is a list of requirements in order to receive this deduction that can be found here.

Over 65 Circuit Breaker Credit

The over 65 circuit breaker credit limits how much your taxes will increase each year. With this credit, your taxes will increase no more than 2 percent each year. There is a list of requirements in order to receive this deduction that can be found here.

Zero Property Tax in Active Adult Community Living and Senior Retirement Communities

For those 55+ years of age and above, living in an active adult community and senior retirement community is an excellent option. Depending on the home agreement or contract, residents may be able to pay zero property tax on that residence. In addition to zero property tax, some seniors will find that it is cheaper to live in a retirement community after comparing monthly expenditures (home payment, home maintenance and repairs, lawn maintenance, dining/groceries, electricity, water, transportation, internet, etc.)

Top-Rated Senior Living in Indiana

One of the top-rated communities in the state is The Stratford, a Continuing Care Retirement Community (CCRC) located in Carmel, just north of Indianapolis in the Village of WestClay. As a CCRC, The Stratford proudly offers a full continuum of care including independent living, assisted living, memory care, skilled nursing, and senior rehabilitation. The benefit of living in a community like Marsh’s Edge is that should your needs change, there is no need to relocate as you’ll be at home in a community of friends and have easy access to the care you require in your own home. To learn more about The Stratford, click here.

Source: Indiana Department of Local Government Finance – Deductions Property Tax

State of Indiana and Federal Tax Resources:

State of Indiana Official Website
Indiana Department of Revenue
Indiana Department of Local Government Finance
State of Indiana – Bureau of Motor Vehicles (BMV)
United States Internal Revenue Service (IRS)
United States Department of the Treasury

Federal Tax Deductions for Seniors

For those who are 65 and older, in addition to state and local tax deductions there are federal tax deductions and exclusions that may apply to your yearly tax filing. Some of the top deductions are listed below:

What is the Standard Federal Tax Deduction for Seniors Over 65?

The standard tax deduction is a set dollar amount that reduces your overall taxable income. This can vary based on your filing status, age, whether you are blind, or if another taxpayer can claim you as a dependent. In 2021 and 2022, the IRS increased the standard deduction for seniors who are 65 and over. The information for both years can be found below:

2021 Senior Citizen Standard Income Tax Deduction

In the 2021 tax year (filed in 2022), the standard deduction is $12,550 for Single filers and Married Filing Separately, $25,100 for Married Filing Jointly and Surviving Spouses, and $18,800 for the Head of Household.

For those 65 years of age or legally blind, the standard deduction was increased in 2021 to $1,700 for Single filers or Head of Household, and $1,350 (per person) for married filing jointly, married filing separately, and Surviving Spouses.

2021 Standard Tax Deduction for Seniors Over 65 Years of Age with the Standard Deduction Increase*:

Filing Status2021 Standard Deduction Under 65 Years of Age2021 Additional Standard Deduction Over 65 Years of Age2021 Total Standard Deduction Over 65 Years of Age*
Single (Unmarried and not a Surviving Spouse)$12,550$1,700 = $14,250
Married Filing Separately$12,550$1,350 = $13,900
Married Filing Jointly$25,100$1,350 + $1,350 (One deduction for each spouse)= $27,800
Surviving Spouses$25,100$2,700= $27,800
Head of Household$18,800$1,700= $20,500

* If you are legally blind, there are additional deductions that apply. Check IRS Form 1040 or 1040A and speak with your licensed tax professional to learn more.

To check your 2021 Standard Deduction, visit the Interactive Tax Assistant (ITA) at IRS.gov

2022 Senior Citizen Standard Income Tax Deduction

In the 2022 tax year (filed in 2023), the standard deduction is $12,950 for Single Filers and Married Filing Separately, $25,900 for Married Filing Jointly and Surviving Spouses, and $19,400 for the Head of Household.

For those 65 years of age or legally blind, the standard deduction was increased in 2022 to $1,750 for Single filers or Head of Household, and $1,400 for Married Filing Jointly, Married Filing Separately, and Surviving Spouses.

2022 Standard Tax Deduction for Seniors Over 65 Years of Age with the Standard Deduction Increase*:

Filing Status2022 Standard Deduction Under 65 Years of Age2022 Additional Standard Deduction Over 65 Years of Age2022 Total Standard Deduction Over 65 Years of Age*
Single (Unmarried and not a Surviving Spouse)$12,950$1,750= $14,700
Married Filing Separately$12,950$1,400= $14,350
Married Filing Jointly$25,900$1,400 + $1,400 (One deductionfor each spouse)= $28,700
Surviving Spouses$25,900$2,800= $28,700
Head of Household$19,400$1,750= $21,150

* If you are legally blind, there are additional deductions that apply. Check IRS Form 1040 or 1040A and speak with your licensed tax professional to learn more.

Each situation is different, but if the standard deduction is less than your itemized deductions, it’s better to itemize and save money. If your standard deduction is more than your itemized deductions, it’s better to opt for the standard deduction. Speak with your licensed tax professional to determine which deduction is correct for you.

Medical and Dental Federal Tax Deductions

For retirees, medical, healthcare, and dental expenses are often one of the largest expenses. According to IRS.gov, if you itemize your deductions for a taxable year on Schedule A (Form 1040 – Itemized Deductions), you may be able to deduct expenses you paid that year for medical and dental care for yourself, your spouse, and your dependents. You may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income. You figure the amount you’re allowed to deduct on Schedule A (Form 1040). Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body.These deductions include prescription drugs, nursing home care, long-term care insurance premiums, insurance premiums (including Medicare), and additional out-of-pocket healthcare expenses. For a full list of acceptable tax deductions, visit IRS.gov’s Medical and Dental Expenses here.

Is Assisted Living Tax Deductible?

For those who are in an assisted living retirement community, there may be medical tax deductions that are associated with the care that is received during that tax year.

Residents of assisted living may be entitled to deduct as a medical expense a portion of the monthly service fees and entrance fees which represent medical care in the year paid. The Internal Revenue Code (IRS) does not contain detailed guidance on how to compute this, therefore each resident should consult their licensed tax professional as to the ultimate deduction and disclosure decisions based on their individual situation.

Monthly service fees paid for assisted living and skilled nursing care may be deducted as medical expenses except those charges for non-medical items such as beauty shop charges or guest meals. This treatment is allowable provided that residents require the services, are chronically ill and the services are provided under a plan of care prescribed by a licensed health care practitioner (IRC Section 7702B(c)).

A resident must meet certain criteria to be eligible for a 100% medical deduction for monthly services fees paid. The resident must be unable to perform, without substantial assistance from another individual, at least two activities of daily living for a period of at least 90 days, or the resident requires substantial supervision to protect their health and safety due to severe cognitive impairment. Activities of daily living include eating, toileting, transferring, bathing, dressing, and continence. The services must also be provided pursuant to a plan of care prescribed by a licensed health care practitioner.

For a full list of acceptable tax deductions, visit IRS.gov’s Medical and Dental Expenses here.

Federal Tax Resources:

United States Internal Revenue Service (IRS)
United States Department of the Treasury
IRS Standard Deduction Calculator
IRS Medical and Dental Expenses
Disclaimer: The information above should function as a starting point for your tax research but should not be substituted for direct advice from a licensed tax professional. State and Federal taxes are ever-changing and this list may not be current or up to date with the current tax laws, deductions, relief programs, rebates, requirements, etc. Additional tax deductions, credits, and relief programs may be available depending on your town and county of residence within the State of Connecticut. Consult with your local municipality’s tax department, the Connecticut Department of Revenue, U.S. Internal Revenue Service (IRS) and your licensed tax professional to learn more about programs that are available for the current tax year.